Treasury drops tax treaty anti-avoidance changes
Exchequer secretary to the Treasury David Gauke last week quietly abandoned a consultation process on draft legislation to thwart tax avoidance arrangements that exploit double taxation agreements.
“The responses so far received have made it clear that the proposed legislation, as drafted, could cause significant uncertainty for compliant UK businesses and overseas investors about its intended scope and its practical effect,” he said in a ministerial statement on Friday 9 September.
“The government are committed to providing certainty to taxpayers and acknowledge the concerns raised in the responses to the consultation. They have therefore decided not to proceed further with the consultation on the proposed legislation and will not include it in the Finance Bill 2012.”
The draft clauses were designed to introduce a UK override on treaties that had been agreed - something this country has resisted previously when other countries such as the USA proposed them. They would have introduced two provisions that would rule out protection under existing double tax treaties where certain avoidance conditions were and there was a scheme in place.
Tax barrister Kevin Cummings savaged the proposals in Tax Journal, taking issue with both the loose wording of the draft legislation and the shortened consultation that took place.
Anne Fairpo, who has just taken charge of an international tax discussion group on AccountingWEB.co.uk , agreed. “It was such a mess of a proposal I couldn't see how it was realistically supposed to be make sense in the context of the government's approach elsewhere,” she said.